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VEU vs. VHT: What’s The Difference?

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and VHT is a Vanguard Health fund. So, what’s the difference between VEU and VHT? And which fund is better?

The expense ratio of VEU is 0.02 percentage points lower than VHT’s (0.08% vs. 0.1%). VEU also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VEU has provided lower returns than VHT over the past ten years.

In this article, we’ll compare VEU vs. VHT. We’ll look at industry exposure and annual returns, as well as at their fund composition and risk metrics. Moreover, I’ll also discuss VEU’s and VHT’s performance, holdings, and portfolio growth and examine how these affect their overall returns.

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Summary

VEUVHT
NameVanguard FTSE All-World ex-US Index Fund ETF SharesVanguard Health Care Index Fund ETF Shares
CategoryForeign Large BlendHealth
IssuerVanguardVanguard
AUM53.64B17.94B
Avg. Return6.64%16.04%
Div. Yield2.31%1.15%
Expense Ratio0.08%0.1%

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.

The Vanguard Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.

VEU’s dividend yield is 1.16% higher than that of VHT (2.31% vs. 1.15%). Also, VEU yielded on average 9.40% less per year over the past decade (6.64% vs. 16.04%). The expense ratio of VEU is 0.02 percentage points lower than VHT’s (0.08% vs. 0.1%).

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Fund Composition

Industry Exposure

VEU vs. VHT - Industry Exposure

VEUVHT
Technology12.94%0.05%
Industrials12.19%0.05%
Energy4.69%0.0%
Communication Services7.44%0.0%
Utilities2.89%0.0%
Healthcare9.34%99.57%
Consumer Defensive8.28%0.0%
Real Estate3.04%0.0%
Financial Services18.46%0.02%
Consumer Cyclical12.57%0.0%
Basic Materials8.17%0.31%

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has the most exposure to the Financial Services sector at 18.46%. This is followed by Technology and Consumer Cyclical at 12.94% and 12.57% respectively. Real Estate (3.04%), Energy (4.69%), and Communication Services (7.44%) only make up 15.17% of the fund’s total assets.

VEU’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Industrials, and Consumer Cyclical stocks at 8.17%, 8.28%, 9.34%, 12.19%, and 12.57%.

The Vanguard Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.

VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.

VEU is 18.44% more exposed to the Financial Services sector than VHT (18.46% vs 0.02%). VEU’s exposure to Technology and Consumer Cyclical stocks is 12.89% higher and 12.57% higher respectively (12.94% vs. 0.05% and 12.57% vs. 0.0%). In total, Real Estate, Energy, and Communication Services also make up 15.17% more of the fund’s holdings compared to VHT (15.17% vs. 0.00%).

Holdings

VEU - Holdings

VEU HoldingsWeight
Tencent Holdings Ltd1.57%
Alibaba Group Holding Ltd Ordinary Shares1.4%
Nestle SA1.22%
Taiwan Semiconductor Manufacturing Co Ltd0.98%
ASML Holding NV0.95%
Taiwan Semiconductor Manufacturing Co Ltd ADR0.91%
Roche Holding AG0.91%
Toyota Motor Corp0.75%
LVMH Moet Hennessy Louis Vuitton SE0.68%
Novartis AG0.67%

VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.

Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.

VHT - Holdings

VHT HoldingsWeight
Johnson & Johnson7.34%
UnitedHealth Group Inc6.44%
Pfizer Inc3.7%
Abbott Laboratories3.48%
Thermo Fisher Scientific Inc3.37%
AbbVie Inc3.37%
Merck & Co Inc3.33%
Eli Lilly and Co3.17%
Danaher Corp2.91%
Medtronic PLC2.83%

VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.

AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.

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Risk Analysis

VEUVHT
Mean Return0.561.33
R-squared98.4459.86
Std. Deviation15.0813.58
Alpha0.287.99
Beta0.990.75
Sharpe Ratio0.41.13
Treynor Ratio5.1220.74

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a R-squared of 98.44 with a Beta of 0.99 and a Treynor Ratio of 5.12. Its Standard Deviation is 15.08 while VEU’s Mean Return is 0.56. Furthermore, the fund has a Alpha of 0.28 and a Sharpe Ratio of 0.4.

The Vanguard Health Care Index Fund ETF Shares (VHT) has a Beta of 0.75 with a R-squared of 59.86 and a Alpha of 7.99. Its Treynor Ratio is 20.74 while VHT’s Standard Deviation is 13.58. Furthermore, the fund has a Sharpe Ratio of 1.13 and a Mean Return of 1.33.

VEU’s Mean Return is 0.77 points lower than that of VHT and its R-squared is 38.58 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than VHT. The Alpha and Beta of VEU are 7.71 points lower and 0.24 points higher than VHT’s Alpha and Beta.

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Performance

Annual Returns

VEU vs. VHT - Annual Returns

YearVEUVHT
202011.39%18.21%
201921.63%21.97%
2018-13.97%5.55%
201727.27%23.34%
20164.77%-3.33%
2015-4.67%7.22%
2014-4.05%25.38%
201314.5%42.67%
201218.55%19.1%
2011-14.25%10.57%
201011.85%5.75%

VEU had its best year in 2017 with an annual return of 27.27%. VEU’s worst year over the past decade yielded -14.25% and occurred in 2011. In most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares provided moderate returns such as in 2016, 2020, and 2010 where annual returns amounted to 4.77%, 11.39%, and 11.85% respectively.

The year 2013 was the strongest year for VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.

Portfolio Growth

VEU vs. VHT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VEU$10,000$18,5076.64%
VHT$10,000$48,46416.04%

A $10,000 investment in VEU would have resulted in a final balance of $18,507. This is a profit of $8,507 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.64%.

With a $10,000 investment in VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.

VEU’s CAGR is 9.40 percentage points lower than that of VHT and as a result, would have yielded $29,957 less on a $10,000 investment. Thus, VEU performed worse than VHT by 9.40% annually.


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